An example of a mall kiosk in the United States. The Israelis are renowned for their aggressive selling tactics.From the Flickr account of Kimco Re

Mall Rat: How the Israeli King of U.S. Kiosk Cosmetics Ended Up in Jail

Omer Gur was sentenced to 6.5 years in a Virginia court last week for conspiracy to defraud the U.S. and conspiracy to launder money. His sentence is unlikely to deter other young Israelis looking to make a quick buck, and lots of them.

Theres nothing special about the Rassco shopping mall in Upper Nazareth. Just a photography and cellphone store, supermarket, post office and a building covered with green tiles. But if you grew up in this northern Israeli city in the 1980s and 90s, this was the place. The old shopping mall, the citys first, was the entertainment hub back then.

Related Articles

Even if the centers best days are long behind it, its position in the lives of the youngsters of Upper Nazareth may well be the reason why Omer Gur Geiger chose to call his company Rasko. Gur (as he is most commonly known), who grew up not far from the mall, used the name when he founded his company for selling cosmetics in the United States. This was not his only demonstration of sentimentality. Gur, 36, also named a Rasko subsidiary Stanga, most likely after the two-player soccer game, and even stole a slogan from the original Rassco: Sometimes you do choose your family.

Gur operated his businesses through these two firms, and others, and it was his illegal business practices that saw him sentenced to 6.5 years in jail by the District Court for the Eastern District of Virginia last week. In March, Gur had been indicted on 34 counts of conspiracy to defraud the United States, visa fraud, encouraging and inducing illegal entry, harboring illegal aliens, transporting illegal aliens and conspiracy to launder money, and pleaded guilty to conspiracy to defraud the United States and conspiracy to launder money in July.

Israelis making big money

The Venetian hotel in Las Vegas in no way resembles the Nazareth mall. But its where Raskos 4,000 employees met on January 11 for the companys annual event, which included an awards ceremony for outstanding employees (held in the casino of the adjacent Palazzo Resort Hotel). And this was not the first such event: every January since 2012, the company jetted in its employees for the ceremony.

The workers probably wouldnt have enjoyed their stay in the hotel – owned by casino magnate Sheldon Adelson – if they had known the FBI was hard on their tail. The indictment against Gur, and nine others, shows how much effort and resources the FBI poured into the case against Rasko and its subsidiaries.

Starting in 2011, the indictment detailed Raskos bank transfers, rental contracts, airplane tickets and emails received with peoples rsums. Two months after the company awards this January, Gur and the others were indicted and sitting in a North Carolina jail.

Rasko was accused of hiring almost 150 workers and of making at least $14 million over the past few years. In addition to his prison sentence, Gur was fined $25,000 by the court and forced to forfeit several properties in North Carolina, a 2011 Audi Q5 SUV and $300,000 in cash.

Its hard to believe Gur never imagined that the law would one day catch up with him. After all, his business involved bringing Israelis into the United States to work at mall kiosks selling cosmetics and other items – and was based on illegal methods. Gur and his associates helped at least 140 Israelis work illegally in the United States, bringing them in on tourist visas and then not paying taxes or reporting income for them.

The Rasko chiefs were also charged with helping the workers file fraudulent visa renewal applications, saying they were visiting family and friends and not working. Rasko staff were also charged with defrauding some of their own employees – for example, by promising to pay for their transportation to the United States and housing, but later deducting these costs from their paychecks, as well as not paying taxes and benefits (as required by law). In addition, some employees only received gift cards and were never paid in cash.

Omer Gur with members of the Rasko team. Taken from the company's promotional video.

The work included aggressive selling, with the enormous potential to make money – often thousands of dollars per month for the sellers, who would work long hours for as long as the mall was open. While the sellers faced the threat of deportation from the United States, ultimately the management faced much harsher treatment.

Israelis get into trouble in this business all the time, says Amalia (not her real name), an Israeli who lives in the United States and worked with Gur in recent years. But in this case, the big difference was the large sums of money he was admitted to laundering. Gur was not someone with a kiosk in a mall who made $50,000 during the peak Christmas season, and that was why his punishment was equally harsh, said Amalia.

Gur is a veteran of Israels naval commandoes (Shayetet 13 – the Israeli SEALs). Another Israeli who once worked with Gur in the kiosk business, Eran (again, a pseudonym), said the large number of people they hired showed how talented and successful Rasko was. The Israelis who succeed in the business in the United States and make a lot of money are those with bags of motivation and ambition, and theyre not average Joes, he observed. Not everybody does what Gur did – it took managerial skills and the ability to plan ahead; a lot of hard work and determination. When I met them, they were small but successful, Eran recalls. When they had only four or five kiosks, they made a lot of money. They simply stayed there a year too long, he added.

A food chain exists in the cosmetics kiosk industry: You start at the very bottom, and slowly work your way up, said Eran. The foundation is the regular employees – Israelis who come to the States for a short time, enjoy the experience and make great money. There is no shortage of such workers, and many return to Israel with $30,000-$50,000 for three to five months work. Some even fund their entire college education this way, he said. Some come back every summer for a few months, and thats enough for them to get by for the rest of the year without working in Israel.

The atmosphere is amazing for young, low-level workers: After invariably spending up to three years in the Israeli army, they are enjoying a life thats completely free, with a lot of money and fun, continued Eran. The owner of the kiosk rents four or five apartments, with four or five workers in each, and they have a great time, he said. Its the quickest way to make money.

The owners are usually former low-level workers who have enjoyed great success and break out on their own – but these people are very rare. The idea is to develop the business on the basis of a partnership: Every time, you take your best employee and open another kiosk for him in another state, and then bring him two more Israelis to work under him, and he becomes your partner, said Eran.

I always joke that when they talk about profitability, first comes drug dealing and then its the kiosks, laughed Eran. There are a lot of people who reach that level, return to Israel afterward and leave managers in the United States who will watch over the business for them.

Why is it so important that the sellers are Israeli?

Eran: Its easier for the Israeli owners to communicate with them – but its work in which you just need to look American, to look appropriate, in a button-down shirt.

Usually, one of the partners is in the United States and the other partner is in Israel handling the recruitment – because thats a crucial part of the business, says Nava (not her real name). After all, the workers are what will make or break the business and are its biggest expense. You must find good people who can be managers – and if they happen to have U.S. citizenship too, thats ideal, she noted.

Catching a big fish

The websites offering jobs for selling cosmetics in the United States all emphasize the big money to be made. They speak of $4,000-$8,000 a month, which is very attractive for someone fresh out of the army, and many times the average salary in Israel. The money is usually paid in cash dollars, without any taxes being deducted.

Most of the workers arrive in the United States on tourist visas. They are not there illegally; its just that theyre not allowed to work and are also paid under the table, said Eran.

When asked why it has to be done illegally while evading taxes, Eran explained that its often a result of the sales method. Buy two products for $20 and get two free, is the standard method in America, he says, but the Israelis have perfected it. The sellers are pleasant, industrious and want to succeed. They dont sit and wait for customers to come to them, like the Americans do, but get up and go to them. The business is based on a method that only the Israelis do, he added.

Gur, who owned two homes valued at $1.3 million, lived in Raleigh, North Carolina, with his wife and two children. After the navy, he came to the United States on a tourist visa. He married in 2005, in what prosecutors called a fictitious marriage for immigration purposes, and became a permanent resident. Five of the other indicted Israelis also received U.S. citizenship or residence through marriage.

He was big, but other companies are bigger than him, Amalia said last week, when we asked why Rasko became a target. The reason could be the region Gur worked in – Virginia and the East Coast – which is an area where the government is situated and youre closer to the fire. Its a region where they catch a victim every three or four years. Hes not going to be the last, because its natural that someone will take over the malls where he worked.

Despite the heavy sentence, the recruitment process continues. We called one Israeli firm that employs Israelis on its mall kiosks and asked about a job there, and nothing much has changed: They werent deterred by the fact we didnt have a U.S. employment visa.